136 CSC v.

DBM
G.R. No. 158791 (2005)
Carpio-Morales, J. / Tita K
Subject Matter: III. Quasi-judicial power; D. Judicial determination of sufficiency of standards
Summary:
CSC seeks to compel the DBM to release the balance of its budget for Fiscal year 2002. CSC claims that there was an
unreleased balance intentionally withheld by DBM becase of the “no report, no release” policy in the Nat’l Budget Circular No.
478. CSC alleges that the application of the policy upon an independent constitutional body like the CSC is a violation of the
principle of Fiscal autonomy, hence, unconstitutional. DBM opposes the petition based on the non-exhaustion of
administrative remedies, among other grounds. SC held that the rule on the non-exhaustion of administrative remedies does
not apply here.
Doctrines:
The rule on exhaustion of administrative remedies (invoked by DBM) applies only where there is an express legal provision
requiring such administrative step as a condition precedent to taking action in court.
o In this case, since CSC is not mandated by any law to seek clarification from the Secretary of Budget and
Management prior to filing the present action. Its failure to do so does not call for the application of the rule.
Parties:
Petitioner CIVIL SERVICE COMMISSION
Respondent DEPARTMENT OF BUDGET AND MANAGEMENT
Facts:
CSC filed a petition for mandamus seeking:
a. To compel DBM to release the balance of its budget for fiscal year 2002.
b. A determination by the Court of the extent of the constitutional concept of fiscal autonomy.
CSC alleged that P215,270,000 was appropriated for its Central Office by the General Appropriations Act (GAA) of 2002.
While the total allocations, if all sources of funds are considered, amount to P285,660,790.
However, the total fund releases by DBM was only P279,853,398, leaving an unreleased balance of P5,807,392.
CSC claims that the balance was intentionally withheld on the basis of its “no report, no release policy.”1
Arguments:
CSC contends that:
1) the application of the “no report, no release policy” upon independent constitutional bodies such as the CSC is
unconstitutional because it violates the principle of fiscal autonomy.
DBM, on the other hand, argues that:
1) CSC did not exhaust administrative remedies as it could have sought clarification from respondents Secretary
regarding the extent of fiscal autonomy before resorting to Courts.
2) Even assuming that administrative remedies were exhausted, there are no exceptional and compelling reasons to
justify the direct filing of the petition with this Court instead of the trial court, thus violating the hierarchy of courts.
3) DBM had not strictly enforced the “no report, no release policy” upon offices vested with fiscal autonomy. It claims
that it has applied A.M. No. 92-9-029-SC2 (Constitutional Mandate on the Judiciary’s Fiscal Autonomy).

1
Allocations for agencies are withheld pending their submission of the documents mentioned in Sections 3.8 to 3.10 and Section 7.0 of National Budget Circular
No. 478 on Guidelines on the Release of the FY 2002 Funds which documents are:
1. Annual Cash Program (ACP)
2. Requests for the Release of Special Allotment Release Order (SARO) and Notice of Cash Allocation (NCA)
3. Summary List of Checks Issued and Cancelled
4. Statement of Allotment, Obligations and Balances
5. Monthly Statement of Charges to Accounts Payable
6. Quarterly Report of Actual Income
7. Quarterly Financial Report of Operations
8. Quarterly Physical Report of Operations
9. FY 2001 Preliminary and Final Trial Balance
10. Statement of Accounts Payable
 4) The delay in releasing the balance of petitioners budget was not on account of any failure on CSC’s part to submit the
required reports; rather, it was due to a shortfall in revenues.
Issue/s:
1. WON the petition must fail due to the non-exhaustion of administrative remedies. (NO)
2. WON the petition must fail due to the alleged violation of the heirarchy of court. (NO)
3. WON the “no report, no release policy” may be validly enforced against offices vested with fiscal autonomy. (NO)
4. WON DBM is justified in withholding funds by reason of shortfall in revenues. (NO)
Ratio:
1. Rule on non-exhaustion of administrative remedies does not apply in this case.
 The rule on exhaustion of administrative remedies (invoked by DBM) applies only where there is an express legal
provision requiring such administrative step as a condition precedent to taking action in court.
o In this case, since CSC is not mandated by any law to seek clarification from the Secretary of Budget and
Management prior to filing the present action.
o Its failure to do so does not call for the application of the rule.
2. The direct filing of the petition with the SC is justified.
 The rule on heirarchy of courts is not absolute.
 A direct invocation of this Court's original jurisdiction may be allowed where there are special and important reasons
therefor, clearly and specifically set out in the petition.
o In this case, CSC justifies its direct filing of the petition with the SC “as the matter involves the concept of fiscal
autonomy granted to it as well as other constitutional bodies, a legal question not heretofore determined and
which only the Honorable Supreme Court can decide with authority and finality.”
o To this Court, such justification suffices for allowing the petition.
3. The “no report, no release policy” may NOT be validly enforced against offices vested with fiscal autonomy.
 Indeed, such policy cannot be enforced against offices possessing fiscal autonomy without violating Article IX (A), Section
53 of the Constitution.
 In Province of Batangas v. Romulo, in construing the phrase automatic release in Section 6, Article X of the Constitution
reading:
Sec. 6. Local government units shall have a just share, as determined by law, in the national taxes which shall be
automatically released to them,
The SC held:
“Websters Third New International Dictionary defines automatic as involuntary either wholly or to a major extent so that
any activity of the will is largely negligible; of a reflex nature; without volition; mechanical; like or suggestive of an
automaton. Further, the word automatically is defined as in an automatic manner: without thought or conscious
intention. Being automatic, thus, connotes something mechanical, spontaneous and perfunctory. As such the LGUs are
not required to perform any act to receive the just share accruing to them from the national coffers.”
o Thus, by parity of construction, automatic release of approved annual appropriations to CSC (a constitutional
commission which is vested with fiscal autonomy) should thus be construed to mean that no condition to fund
releases to it may be imposed.
4. DBM’s argument on shortfall in revenues has NO merit. Shortfall in revenues cannot justify the withholding of funds.
Firstly, the alleged shortfall is totally unsubstantiated.
Secondly, even assuming that there was indeed such a shortfall, it does not justify non-compliance with the mandate of
above-quoted Article IX (A), Section 5 of the Constitution.

2
The Supreme Court may submit to the Department of Budget and Management reports of operation and income, current plantilla of personnel, work and financial
plans and similar reports only for recording purposes. The submission thereof concerning funds previously released shall not be a condition precedent for
subsequent fund releases.
3
Sec. 5. The Commission shall enjoy fiscal autonomy. Their approved appropriations shall be automatically and regularly released.
 Asturias Sugar Central, Inc. v. Commissioner of Customs: An interpretation should, if possible, be avoided under which a
statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed,
explained away, or rendered insignificant, meaningless, inoperative, or nugatory.
o If DBM’s theory were adopted, then the constitutional mandate to automatically and regularly release approved
appropriations would be suspended every year, or even every month that there is a shortfall in revenues, thereby
emasculating to a significant degree, if not rendering insignificant altogether, such mandate.
 Furthermore, the Constitution grants the enjoyment of fiscal autonomy only to the Judiciary, the Constitutional
Commissions (of which petitioner is one) and the Ombudsman.
o To hold that petitioner may be subjected to withholding or reduction of funds in the event of a revenue shortfall
would, to that extent, place petitioner and the other entities vested with fiscal autonomy on equal footing with all
others which are not granted the same autonomy, thereby reducing to naught the distinction established by the
Constitution.
 The agencies which the Constitution has vested with fiscal autonomy should thus be given priority in the release of their
approved appropriations over all other agencies not similarly vested when there is a revenue shortfall.
Wherefore, the petition is GRANTED. Respondent’s act of withholding the subject funds from petitioner due to revenue
shortfall is hereby declared UNCONSTITUTIONAL.